In Crisis, What Should Entrepreneurs Make Free(mium)?

Lots of organizations, particularly subscription businesses, are changing their rules about what is free and what is paid, in response to the coronavirus.

The Atlantic, The Wall Street Journal and Bloomberg Business are a few of the many major publishers that have removed the paywall in front of coronavirus-related content. In other words, now non-subscribers have access to articles relating to the pandemic and impending financial meltdown.

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News isn’t the only industry that is giving away more than usual during this time of crisis:

Fitness organizations, like Orange Theory, are live streaming classes that were formerly in-person, for members only. Hello Core is offering free meditation classes to the public three times a day through Instagram Live. Zoom’s CEO, Eric S. Yuan, is expanding the features available on free accounts for K through 12 educators.

Many of my clients are asking what they should be giving away–a difficult choice in a time when many businesses are desperate for short-term revenue to avoid mass layoffs and simply “keep the lights on.”

But for those of us who are entrepreneurs running small businesses, times are tough. Many of us are struggling to make payroll and keep our doors open.

So, the question is, what should entrepreneurs and small business owners be giving away during these times?

The role of free in subscription models (in normal times)

In normal times, I advise membership economy companies of all sizes to make sure to consider the role of “free” in their business model, in a deliberate way. They should ask themselves what the ROI of free might be.

A free trial can be useful if one of your big challenges is that prospects either don’t understand your value proposition or don’t believe your promise.

For example, if I say I have a software that makes video production easy, you might be confused about what features it has, what products it works best with and what level of sophistication is required for it to truly be easy.

At first, you might not understand the value of the product, but if I give you an opportunity to play with the software, suddenly, lightbulbs will go off as you start to understand what I meant.

Or maybe you just don’t believe my promise that my subscription box contains the most delicious steak in the whole wide world. So, I give you a tiny taste, on me, so you believe that what I’m putting in the boxes is really special.

With a free trial, you don’t want to provide too much, or fully solve your customer’s problem. You don’t want to give such a big taste of steak that the prospect isn’t hungry anymore. Many free trials do exactly that–and report the problem of “failure to launch” in which someone signs up for a trial, uses the trial very heavily and then cancels just before the first payment is due. With the free trial, you just want to allay the concerns and confusion, giving away as little as possible.

In contrast, freemium is an ongoing membership which provides real value for free.

Related: WJR Business Beat with Jeff Sloan: Subscription Box Economy

You might use freemium for one of three reasons:

1. To change behavior. If a news organization wants to move print readers to digital, it might make 10 articles a month available for free. If the freemium subscriber keeps bumping up against the paywall, eventually they will recognize that they actually use digital news more than they thought, and probably would benefit from a paid, unlimited subscription.
2. Because the free members ARE the product. This could be true in a case like LinkedIn, which has what is known as a “network effect.” Each new free subscriber makes the paid membership more valuable for the recruiters, job seekers and salespeople who are looking to find the right person. Or it could be an ad supported model, where the business is trying to attract enough of the right kind of “eyeballs.” In all these cases, the free benefits are given to seed the bigger opportunities.
3. Because the free subscribers are an acquisition for paying subscribers. Put another way, some freemium models have a viral component in that just by using the product, freemium members are marketing the service to their community. Hotmail was one of the first “viral” product: I sign up for free mail, and send you an email with the Hotmail link, so you sign up. The same thing works for any product where part of the on boarding process is for you to connect with all of your contacts.

In normal times, these are the only reasons to justify giving something away (other than philanthropy, which is not necessarily a business decision, but rather a personal one).

But in times of extraordinary events, these rules can be adjusted. This is true certainly of times like now, when people face dire and unexpected challenges. But it can also be true in cases of great time-limited or unexpected opportunity.

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The role of free in subscription models (in extraordinary times)

In extraordinary times, there are additional reasons to give away free stuff:

1. To take care of one’s members. My neighborhood yoga studio had to scramble to figure out how to offer remote classes. With no real digital footprint beyond a basic website, the owner worked quickly to figure out how to use video conferencing to support her community. Our local drugstore is offering delivery of prescriptions so at-risk patients don’t need to come into the stores. These thoughtful extensions of services to existing members at no additional cost make sense, because they are guided by maintaining and deepening the long term relationships.
2. To take care of the community. This goes beyond discretionary philanthropy and is what happens when organizations recognize that their entire community is at risk and that their organization has resources to be a source of relief. For example, the public performance collective known as “This is Not a Theatre Company” is offering a free app with their Subway Plays to help people immerse themselves in artistic experience during tough times.
3. To build brand awareness. The more cynical among us can point out that these public and temporary acts of generosity are not altruistic. And in many cases, this is true…or at least altruism isn’t the full reason for the generosity. Even my 83-year-old neighbor is using video conferencing tools to continue tutoring. Never have so many people tried video conferencing–so there may be a little “land grab” behavior to win these newcomers. We are all looking for new habits on everything from how to work from home to how to get our groceries, and businesses are scrambling to gain trial as well as to gain media attention as “one of the good guys.”

Not every business should give something away though, even in these crazy times. I would encourage you to be deliberate about what you give away and what the rationale is. If you’re trying to help out people who have been laid off, then only make your offer to those who have been laid off. If you’re trying to help the elderly, be specific. The biggest risk is that you give away too indiscriminately. This can result in both a reduced perception of the value you provide and a lack of revenue that drives you out of business.

Actually, that’s not true: the biggest risk is that you are so focused on short term revenue that you risk losing your humanity and forgetting the mission that got you into business in the first place.

Now is the perfect time to take a quick step back, refocus on your forever promise, and launch a strategy that will carry you through these tough times. And maybe even strengthen your relationships along the way. Hang in there.

Robbie Kellman Baxter is the author of “The Forever Transaction: How to Build a Subscription Model So Compelling, Your Customers Will Never Want to Leave” (McGraw-Hill Education), available now wherever books are sold and for purchase via StartupNation.com.